National Security

7:05 am

Thu October 25, 2012

Energy Independence For U.S.? Try Energy Security

A drilling rig near Kennedy, Texas, on May 9. U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world's biggest producer.

Eric GayAP

Gone from this year's presidential campaign are most mentions of climate change, environmental pollution, or green jobs. Former Gov. Mitt Romney, the GOP presidential nominee, prefers to call attention instead to the country's continuing dependence on foreign energy sources.

"I will set a national goal of North American energy independence by the year 2020," Romney declared in August.

The line is now a standard part of Romney's stump speech, and he repeated it in his first two debates with President Obama.

With that promise, Romney joins a long line of U.S. leaders who have preached the virtues of energy independence. Few, however, have explained precisely what this goal means.

A Global Market

In truth, it would be virtually impossible for any country to be totally independent where energy is concerned. Not only would it have to produce all its own oil; it would also have to be independent of the global economy.

Like sugar, wheat, gold and other commodities, oil is also bought and sold on a global market. All the oil produced in the world becomes part of the global oil supply; all the oil used comes out of that supply. The global oil price depends on the supply/demand relation, and the price is essentially the same for all countries.

"If you're in the deep end or the shallow end and somebody takes water out of the pool, it affects both swimmers equally," Jaffe says. "[It's the] same thing if we start pouring water in. You're not pouring the water into just the deep end or just the shallow end."

With oil, all countries are affected when the total supply is down relative to demand; the price goes up. When the supply is boosted and there is plenty of oil for everyone, the global price goes down.

With respect to price, therefore, there is no such thing as energy independence. Even if the U.S. were producing as much oil as it was consuming, a halt in production by Iran or Saudi Arabia would still drive up the oil price in the U.S.

Energy Security

But there is another way to think about energy independence. If a country produces as much oil as it uses, it is less vulnerable to some foreign country shutting the tap. Jaffe, executive director of energy and sustainability at the University of California, Davis, says this is the big reason governments want to reduce their dependence on foreign oil producers.

"If someone is going to cut off your supply, because they don't like your foreign policy or they want to keep you from attacking a country, this is a dangerous thing," Jaffe says.

But is "energy independence" the proper term to describe the national goal?

"I prefer the term 'energy security,' " says Roger Altman, who served as deputy Treasury secretary under President Clinton.

"What that means," Altman says, "is, 'Let's get to the point where the amount we import from rogue or potentially rogue nations who might be hostile to us is down to a point where, if suddenly that supply was interrupted or shut off, we go right on.' "

The U.S. learned the importance of "energy security" in 1973, when Arab countries imposed an oil boycott on the United States to protest its military support for Israel in its war against Egypt and Syria. Americans were soon waiting in long lines at gas stations.

In response to the Arab oil boycott, President Nixon set a new national goal in his 1974 State of the Union speech.

"At the end of this decade, in the year 1980," Nixon proposed, "the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes and to keep our transportation moving."

A Glimmer Of Hope

The fact that we are still talking about this goal nearly 40 years later shows how hard it is to achieve. But there is reason now to believe that energy security may finally be within reach. Energy production in the U.S. is booming, thanks in large part to new techniques for extracting oil and gas from hard-to-reach deposits.

According to the latest estimates from the U.S. government's Energy Information Administration, U.S. production of oil and other liquid petroleum products could soon overtake production from Saudi Arabia, the world's No. 1 oil producer. Oil imports, meanwhile, are declining.

U.S. energy demand remains high, however, and it is likely to be years before the United States has an energy supply entirely its own.

Even in that case, however, the U.S. could significantly boost its energy security, because new production throughout the Western Hemisphere would leave the country less vulnerable to a shutoff from the Middle East or elsewhere.

"It doesn't mean we would never import another barrel of oil outside the Western Hemisphere," says Altman, who is now the chairman of Evercore Partners, an investment banking firm. "What it means is that most of our oil imports would come from Canada, Mexico, Brazil and so forth, and whatever happened in the Middle East would have no severe downside for our economic stability."

This is progress. It's hard to imagine how a conflict with Brazil or Mexico, much less with Canada, could jeopardize the U.S. energy supply.

Increased energy security on the supply side, however, does not mean energy independence on the economic side. A smaller share of the oil we use in the U.S. comes from foreign sources today than was the case a decade ago. But an increase in the world oil price has left U.S. consumers paying more at the gas pump and reminded them of their continued dependence on market events beyond White House control.

Once again this fall, we're hearing presidential candidates talking of energy independence. The use of that phrase offers evidence that the candidates believe in recycling, because the promise of energy independence has been recycled from many past campaigns.

Now, the massive U.S. consumption of energy brings with it a variety of problems - turmoil in the Middle East can threaten our supply. We have to compete for energy with China. And a spike in the price of gas hits us all. So energy independence sounds smart. NPR's Tom Gjelten, however, asks a basic question - whether it is even possible.

TOM GJELTEN, BYLINE: Presidential candidates, for decades, have talked about the need for energy independence, but Mitt Romney this year has out done them all. He hits the theme in almost every speech, every debate.

MITT ROMNEY: I will set a national goal of America and North America, North American energy independence by 2020. I want to get America and North America energy independent. I'm planning on doing, which is getting us energy independent.

GJELTEN: But is this a realistic goal? The truth is, it would be impossible for any country to be totally independent where energy is concerned. Not only would it have to produce all its own oil. It would also have to be independent of the world economy, because oil is bought and sold on a global market.

All the oil produced in the world becomes part of the global oil supply, all the oil used comes out of that supply. In a sense, the oil supply is all mixed together. Energy analyst Amy Jaffe says players in the global oil market are like swimmers in a swimming pool.

AMY JAFFE: If you're in the deep end or the shallow end and somebody takes water out of the pool, it affects both swimmers equally. Same thing if we start pouring water in. You're not pouring the water in to just the deep end or just the shallow end.

GJELTEN: All one pool. With oil, all countries are affected. When the total supply of oil is down, it drives the price up. And when there's plenty of oil, when the supply goes up, the price goes down. For everyone. That's how a market works.

So, as far as the price of oil is concerned, there's no such thing as independence. Even if the U.S. were producing as much oil as it was consuming, a halt in production by Iran or Saudi Arabia would still drive up the oil price right here in the U.S.

But there is another way to think about energy independence. If a country produces as much oil as it uses, it's less vulnerable to some foreign country shutting the tap. Amy Jaffe, now at the University of California Davis, says this is the big reason governments want to reduce their dependence on foreign oil producers.

JAFFE: If someone is going to cut off your supply, because they don't like your foreign policy or they want to keep you from attacking a country, you know, this is a dangerous thing.

GJELTEN: Dangerous because you're an energy hostage. Maybe energy independence is the wrong term for what we're after. Roger Altman, deputy treasury secretary under President Clinton, prefers the term energy security.

ROGER ALTMAN: Let's get to the point where the amount we import from rogue or potentially rogue nations who might be hostile to us is down to a point where, if suddenly that supply was interrupted or shut off, we'd go right on.

GJELTEN: The United States learned the importance of energy security back in 1973, when Arab countries imposed an oil boycott on the United States to protest U.S. support for Israel in its war against Egypt and Syria. Americans were soon waiting in long lines at gas stations. And in 1974, in his State of the Union speech, President Richard Nixon set a new national goal.

PRESIDENT RICHARD NIXON: At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.

GJELTEN: The fact we're still talking about this nearly 40 years later shows how hard it is to achieve energy security. But there is reason now to believe the goal may finally be within reach. Energy production in the United States is booming, thanks in large part to new techniques for extracting oil and gas from hard-to-reach deposits. Imports are going down.

And Roger Altman makes another point: Even if it's years before we have an energy supply entirely our own, new oil production throughout the western hemisphere will at least make us less vulnerable to a shutoff from the Middle East or elsewhere.

ALTMAN: It doesn't mean we'd never import another barrel of oil outside the western hemisphere. What it means is that most of our imports would come from Canada, Mexico, Brazil and so forth, and whatever happened in the Middle East would really have no severe downside to our economic stability.

GJELTEN: This is progress. It's hard to imagine how a conflict with Brazil or Mexico, much less Canada, could jeopardize the U.S. energy supply. Again, however, energy security on the supply side does not mean energy independence on the economic side. A smaller share of the oil we use in the U.S. comes from foreign sources today than was the case a decade ago. But because the world price has gone up, we're paying more at the gas pump.